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2022 (3) TMI 1172 - Tri - Insolvency and BankruptcyVesting of right to use of the trade mark CONCEPT Educations to Corporate Debtor - accounting for the benefits received by it by use of the trade mark CONCEPT Educations till date and pay such sum to the account of the Corporate Debtor in terms of Section 48(c) of the Code - appointment of an independent expert to assess evidence relating to the value of the trade mark CONCEPT Educations - HELD THAT - There was a partnership agreement dated 01/02/2019 between the CD and the Respondent no 1 whereby they agreed to carry on a business in the name of Potential and Concept Educations. Subsequently, there is a deed of Agreement dated 08/02/2019, a week after, in which the right to use of the above Trade Mark CONCEPT Education for 15 years is transferred in favour of the R1 for a mere ₹ 10 Lakhs Furniture, fixtures and Electronics were also transferred in favour of R1 - Further, there is a Deed of Reconstitution of Partnership dated 19/09/2019 by which the CD is ousted and the spouse of the Respondent no 2 and 3 are inducted as partners. The submissions of the Respondent No. 3 that the RP has not followed the provision of the Code as well as Regulations and even after bared by limitation, the application has been filed by the RP without supporting any condonation application do not carry much substance as he himself, as a Suspended Director of the CD has not been co-operating with the RP in completing the process of CIRP - However, the delay in filing this petition by the RP is justified due to Covid Restrictions and non-availability of all financial papers to the Transaction Auditor and the RP from the Suspended Management. Both the R1 and R3 have agreed and given in writing that the RP has given wrong impression that Trade Mark has been sold to the Respondent No. 1. In fact, both the Respondents have confirmed that the CD has still ownership right over the Trade Mark CONCEPT EDUCATION and only right to use the Trade Mark is given for 15 years to R1 against payment of ₹ 10.00 lacs and imparting education for 300 students of the CD for a year - Return of trademark to CD is the part of the Resolution Plan. Hence the right to use of the trade mark CONCEPT Educations is required to be cancelled. There is no liability or any obligations from either side in relation to the use of Trademark from today but it is made clear that the matters of non-cooperation of the Suspended Management, their agreements with the Potential Coaching Institute Pvt. Ltd for use of Trademark for ₹ 10.00 lacs for fifteen years and subsequent withdrawal from the partnership shall be heard along with other IAs filed by the RP under Sections 19, 43, and 66 of IBC 2016 - petition disposed off.
Issues Involved:
1. Whether the transfer of the "right to use" the trademark "CONCEPT Educations" was an undervalued transaction. 2. Whether the transaction was conducted with a related party within the relevant period. 3. Whether the application by the RP was barred by limitation. 4. Whether the RP followed the provisions of the Code and Regulations. 5. Whether the "right to use" the trademark should be vested back in the Corporate Debtor. Issue-wise Analysis: 1. Undervalued Transaction: The RP argued that the transfer of the "right to use" the trademark "CONCEPT Educations" for 15 years for ?10 lakhs was significantly undervalued. The Corporate Debtor had spent crores on advertising and brand building. The transaction was undertaken with a related party, Potential Coaching Institute Pvt. Ltd., within the relevant period of two years. The RP contended that the transfer did not occur in the ordinary course of business and was intended to extract value from the Corporate Debtor. 2. Transaction with a Related Party: The RP demonstrated that the transaction was made with a related party, as defined under Section 5(24) of the IBC, 2016, within the period of two years preceding the insolvency commencement date. The Respondent No. 1, Potential Coaching Institute Pvt. Ltd., was a partner of the Corporate Debtor, and the transaction fell within the relevant period for avoidable transactions under Section 46 of the IBC. 3. Application Barred by Limitation: The Respondent No. 3 argued that the RP did not follow the provisions of the Code and Regulations, and the application was barred by limitation. However, the Tribunal found that the delay in filing the petition was justified due to COVID-19 restrictions and the non-availability of financial papers from the Suspended Management. The RP had faced difficulties in completing the CIRP process due to non-cooperation from the Suspended Directors. 4. Compliance with Provisions of the Code and Regulations: The Tribunal observed that the RP had made reasonable efforts to comply with the provisions of the Code and Regulations. The RP had appointed a Forensic Auditor and was in the process of verifying and collating information. The delay in filing the application was attributed to external factors, and the RP's actions were deemed justified. 5. Vesting the Trademark Back in the Corporate Debtor: The Tribunal noted that the Respondents agreed in writing that the Corporate Debtor still held ownership rights over the trademark "CONCEPT Educations," and only the "right to use" was granted for 15 years. The Respondents' actions, including entering into multiple agreements and reconstituting the partnership, indicated an intention to extract value from the Corporate Debtor. The Tribunal found that the transaction was not conducted in the ordinary course of business and satisfied the criteria for an undervalued transaction under Section 45 of the IBC. Order: The Tribunal accepted the RP's prayer and terminated the agreements between the Corporate Debtor and Potential Coaching Institute Pvt. Ltd. dated 01.02.2019, 08.02.2019, and any subsequent agreements within the look-back period. The "right to use" the trademark "CONCEPT Educations" was withdrawn with immediate effect and vested back in the Corporate Debtor in accordance with Section 48(a) of the IBC. The Tribunal also noted that matters of non-cooperation by the Suspended Management and other related issues would be heard along with other IAs filed by the RP under Sections 19, 43, and 66 of the IBC, 2016. Conclusion: The Tribunal disposed of IA 24 of 2021 in CP (IB) No. 03/GB/2020 with the observations and directions mentioned above, ensuring the successful implementation of the Resolution Plan and the return of the trademark to the Corporate Debtor.
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